On May 25 we created the $33,000 American Portfolio saying:
The purpose of the $33,000 American Portfolio is to be a learning tool for seeking home-run potential with acceptable risk.
Time For an Update:
The $33,000 American Portfolio
JG Boswell (PINK:OTCPK:BWEL)
J.G. Boswell quietly amassed land for cotton -- and water rights and subsidies -- in the southern Central Valley while he was president and CEO of the family company from 1952 to 1984. Everybody in Corcoran knew him, nobody outside the Valley knew anything about Corcoran... and that was just fine with J.G.
America's largest farm! Our play on California water rights as the farm sits on an enormous freshwater aquifer. The Boz has homerun potential if the land is sold or leased for it water rights. Will it be? Have a look here.
We've got six shares of The Boz in our hypothetical portfolio. It last traded at $720, netting us a massive $18 paper gain.
The Boz: +$18
Waterfurnace Renewable (PINK:OTC:WFIFF)
Homebuilders like Toll Brothers (NYSE:TOL) had already run and we like the technology play on energy efficiency (using the earth's potential to retain heat and cold). Economic news has been less than stellar but the stock eked out a modest gain rising to $15.48 from our basis of $15.28. That's a positively huge gain of $40 on our 200 shares.
The WaterFurnace: +$40
Alliance Grain Traders (PINK:OTCPK:AGXXF)
The processer of pulses (peas, lentils, beans and the like) capped a positive trifecta for our common stocks, last trading at $12.45 off of a $10.78 cost basis. A nice gain on 150 shares netting $250.50 on paper (double paper as this portfolio is hypopthetical on top of its unrealized gain).
The Alliance (now we're talking): +250.50
The sober Yin to Arch's enraged Yang, as we'll see. Check out this article on selling cash-secured puts for an in depth analysis of this trade. On May 25 we said:
We'll use a high strike so that if the stock gets away from us and we miss our chance to buy we pocket a hefty gain.
Solazyme traded at $9.90 at the time. We sold the right for someone to sell us 1,100 shares at $12.50 until September 22 and got $3,520 for our services. We kept $13,750 in cash in case we got "put the shares" (thus making it cash-secured). So if September 22 rolls around and SZYM stands at $12.50 or higher, we keep the $3,520 as our profit.
Solazyme closed Friday at $12.51, a better than 25% run and higher than our strike price. So game over and we win right? Not so fast, the puts people bought from us don't expire until September 22 and will have value until then. If we wait until September 22 and our stock has not gone down then we are off the hook and keep the whole $3,520. Unless SZYM suffers a business setback, we intend to hold through September 22. If we want to close the trade before then, however, we have to buy back the puts we sold. That is how we will carry it on our books and they last traded at $2.10/put. 1,100 X $2.10 = $2,310, so that's the cost to close our trade. $3,520 - $2,310 = $1210.
The Soul: +$1,210
Arch Coal (NYSE:ACI)
We are glad we said of Arch:
Our riskiest short-term position and a long-term bet.
Arch closed Friday at $6.01 and traded at $7.30 when we took our positions. See the article referenced under SZYM for an in-depth look at the cash secured puts we sold. We think Arch's future - near and long - looks good and we would be doubling down on our calls here if we did not have this much exposure already. As it is our calls were bought for $2.13 and now go for $1.30. We are holding through July 21 expiry for our puts, but if we wanted out now, the puts go for $2.10 (we sold for 1.27).
The Arch calls: -$664
The Arch puts: -$1079
Amazon toed the line, this is one of our two bearish positions and a long-term bet. The put last traded at $16.15 and we bought at $16.90.
The Zon: -$75
CRM came in for us a bit and its put gained in value thereby, last trading at $16.81 off of our $14.90 basis.
The Force (Luke): +$191
We'll continue to monitor the portfolio but for now check out the link under SZYM for some more analysis. It has only been three weeks but many of our positions have already had dramatic moves. Not putting all of our eggs in one basket of course was key to not have Arch's losses wipe us out. The breakdown:
Stocks and Options: $13,619.50
Cost to close puts: ($5,040)
Disclosure: I am long ACI.
Additional disclosure: I'm also long CRM puts (making it a bearish position)